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Etsy Small Business Taxes - Things you need to know

 

During quarantine, a lot of you started your own small business through Etsy, and completing your taxes can definitely get confusing. We broke it down and simplified it as much as possible.

So, first thing first, you might be receiving a couple of forms from Etsy. That can include:

·        1099-NEC (1099-Misc) – If your shop earned more than $600, Etsy will issue you this form and the IRS a copy as well.

·        1099-K – If you had more than 200 sales or made over $20,000, Etsy will issue you this form

If you don’t receive either form, you can look at your Etsy Shop Finances to determine the amount of sales. Once you receive/obtain this information, be sure to check that the Taxpayer ID and sales amount is correct. If there are any errors, be sure to have them correct it so there are no discrepancies.

The next thing that you will need is all the expenses you occurred during the year for your business. Below is a shortlist of the most common expenses that is associated with your shop:

  • Equipment
  • Materials and Supplies
  • Etsy Fees
  • Credit Card/PayPal Fees
  • Shipping Expenses
  • Marketing and Advertising Costs
  • Business Licenses

Now that you have your income and expenses, you can file your information into a Schedule C. If your net income (sales – expenses) is equal to $400 or more, you will have to file a Schedule SE (Self Employment Taxes). Note that these are all in addition to your Form 1040.

 

*This only applies if you are a sole proprietorship or single-member LLC.

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